The recent market sell-off has had a significant impact on short-term Bitcoin holders, with over 83.3% of them experiencing unrealized losses, according to Glassnode. The sell-off, triggered by a deleveraging event, resulted in the largest single-day downward movement of the year. As a result, prices dropped below the cost basis for short-term holders.
Glassnode’s analysis revealed that the Realized Price and the Long-Term Holder cost basis are both trading noticeably below the short-term holder cost basis. This puts the market in a somewhat precarious position from a psychological standpoint. While long-term holders remained unaffected, short-term holders reacted strongly to the market volatility.
Short-term holders, who typically hold coins for less than 155 days, are the most reactive group of traders to market fluctuations. Currently, over 88.3% of the supply controlled by short-term holders is underwater. Out of the 2.56 million BTC held by this group, only 300k, representing 11.7%, is still in profit. This decline in profit dominance has been consistent throughout the 2023 rally, with more short-term holders acquiring coins at an elevated cost basis.
Glassnode noted that this week marked the largest loss dominance reading since the March sell-off to $19.8k. This indicates that short-term holders are both underwater on their holdings and increasingly sensitive to price movements.
While the bear market of 2022 appears to be nearing its end, some analysts speculate that Bitcoin may experience further downside. There are predictions that the price could drop as low as $12.5k. Monitoring resource Material Indicators described the current Bitcoin market as a “game of chicken,” waiting to see who will make a move to break the chop. Another trader, Jelle, referred to Bitcoin’s intraday movements as the “death chop.”
As short-term Bitcoin holders continue to face unrealized losses, the market remains in a delicate state. Traders and investors will closely monitor future price movements to assess the potential for further downside or a recovery in the near future.